Investor Alert Concerning Marietta Investment Advisor Jay Costa Kelter

Jay Costa Kelter, a Marietta, Georgia investment advisor, was recently charged with defrauding three retirees out of their retirement savings, according to an article in the Atlanta Journal Constitution entitled “Marietta man accused of bilking elderly investors,” written by Lori Norder.  Kelter is the subject of both a criminal action and a civil action filed by the U.S. Securities and Exchange Commission, both of which are pending in Tennessee.  He faces up to 5 years in prison on each count according to the article.  One 75-year-old widow lost approximately $1.4 million and two other retirees lost another $400,000 in the scheme.  Kelter reportedly used some of the funds to purchase luxury goods for himself and engaged in high-risk trading with the rest.

This is not Kelter’s first offense.  His FINRA BrokerCheck Report (CRD # 2787858) discloses two other customer disputes, including one in which the victim was awarded $346,800.00 in a FINRA arbitration case for alleged breach of fiduciary duty, negligence, unsuitability and misrepresentation by Kelter while he was registered with a broker-dealer named Securities Service Network, Inc. It seems likely that there are even more victims.

Kelter has not been registered with a broker-dealer since September 2013.  His registration history is as follows:

04/2007 – 09/2013      Berthel, Fisher & Company Financial Services, Inc. in Johns Creek, GA

01/2005 – 04/2007      VSR Financial Services, Inc. in West Palm Beach, FL

09/1996 – 02/2005      Securities Service Network, Inc. in Knoxville, TN.

Kelter has also done business through various other firms including:

Rare Coins of New Hampshire (Alpharetta, GA)

TMS World (Lake Worth, FL)

Jay Kelter (Alpharetta, GA)

Kelter & Co. LLC (Alpharetta, GA)

Kelter & Company, LLC (West Palm Beach, FL)

BEK Consulting, LLC (N Palm Beach, FL).

If you have lost money with Jay Costa Kelter, we may be able to help and would like to speak with you.  Call The Doss Firm, LLC, (770) 578-1314 for a free consultation.

 

Authorities Arrest Broker/Advisor for Defrauding Three Investors—But Are There Others?

On September 29, 2017, Richard G. Cody, 43, of Jacksonville, Fla., a former investment advisor, was arrested in Florida on charges of violating the Investment Advisors Act of 1940 and lying to the Securities and Exchange Commission in a court proceeding, according to an insurancenewsnet.com article entitled “Former Investment Advisor Indicted for Fraud and Perjury.”  The Financial Industry Regulatory Authority (FINRA) has barred Cody from acting as a broker or otherwise associating with firms that sell securities to the public.

Between May 2005 and August 2016, according to the article, Cody mismanaged the retirement savings of three victims, falsely assuring the victims that their retirement savings were secure, when he knew they were not.  By 2014 the retirement savings of two of the victims had vanished. Cody reportedly concealed the facts by sending the victims fraudulent account statements and tax documents.  In 2013, regulators had suspended Cody from acting as investment advisor, but he failed to disclose that fact to the victims.

Cases like this one often involve just the tip of the iceberg, and one would expect that there are more than three victims of Roger G. Cody.  The brokerage firms that were associated with Cody owed their investor customers a legal duty to supervise Cody and warn them of all the important facts that they learned about Cody.  Cody worked for the following firms over the years:

IFS Securities (2016)

Concorde Investment Services, LLC (2014-2016)

Westminster Financial Securities, Inc. (2010-2013)

Gunnallen Financial, Inc. (2005-2010)

Leerink Swann & Company (2001-2005)

Salomon Smith Barney, Inc. (2000-2001)

Merrill Lynch Pierce Fenner & Smith, Inc. (1997-2000).

If you have had any experience with Richard G. Cody, we would like to speak with you about it.  Contact The Doss Firm, LLC at (770) 578-1314.

SEC Fines UBS for Improper Sales of Reverse Convertible Notes

The Securities and Exchange Commission has announced that UBS Financial Services will pay more than $15 million to settle charges related to unsuitable sales of reverse convertible notes (“RCNs”) to individual (“retail”) investors.  The SEC found that UBS failed to adequately educate and train its sales force in connection with the sale of RCNs as a result of which they had no reasonable basis for recommending them, and could not make proper disclosures to investors.

RCNs are complex securities.  In addition to the risk of default by the issuer, RCNs contain embedded put options giving the issuer the right to not return the investor’s principal at maturity, but instead assign the underlying security (usually a stock) at maturity if the stock price drops to a certain level.  In that case, the investor is left holding a stock that may be worth much less than the price paid for the RCN.

RCNs are alternative investments that typically offer above-market yields.  They are often sold to income-oriented investors who are unable to realize a sufficient return in the persistent low interest rate environment in which we live.  However, most individual investors who purchase RCNs have no idea they can lose money on this investment.

According to the SEC, UBS sold approximately $548 million in RCNs to more than 8,700 relatively inexperienced retail customers.

Investors who have lost money in RCNs should consult with an attorney with experience in representing investors in securities arbitration.  The Doss Firm, LLC has such experience and offers a free initial consultation to investors who may have questions about any of their investments.

 

 

 

Attention Former Customers of Leavitt Freeman Sanders: You May Be Able To Recover Your Investment Losses

Our firm has already filed many individual lawsuits alleging, among other things, investment fraud against Leavitt Sanders and the firms that he traded through.  Those firms include Invest Financial, Triad Advisors, Capital Asset Advisory Services, Sanders Yearian Advisory Group and Leavitt Financial Group. We have developed direct evidence that supports the allegations that these firms are legally responsible to pay back investors for their investment losses.

If you were a victim of this alleged fraudulent scheme, we would be interested in discussing representing your interests with the hope and expectation of recovering some or all of your losses.  We will evaluate your case at no charge.

As background, Mr. Sanders’ CRD reveals over 30 customer complaints for the same type of account mismanagement.  On December 26, 2014, Triad Advisors, Inc. terminated and discharged Mr. Sanders for “mismanagement of RIA related accounts” involving options trading.  (“RIA” means “registered investment advisor.”)

Many of Mr. Sanders’ clients were elderly and retired income-oriented investors.  They have suffered substantial losses.  They entrusted their hard earned retirement savings to Mr. Sanders, who, acting with discretionary trading authority, mismanaged their accounts.  Mr. Sanders breached his fiduciary duty by using a “one size fits all” investment strategy with all of his clients without regard to whether it was prudent or suitable.

Leavitt Sanders of West Point, Georgia, is a former licensed stockbroker and investment adviser who operated in Georgia and Alabama.  Mr. Sanders is no longer in the industry for mismanaging the brokerage accounts of numerous clients by excessive trading in high risk investments, including put and call options, and day-trading huge stock positions on margin.  The options and stocks (or stock indices) included Priceline.com, Amazon, the S&P500 Index, NASDAQ-100 Index.

Mr. Sanders was registered with Financial Network Investment Corporation (“Financial Network”) from November 1998 through October 2008; Invest Financial Corporation (“Invest Financial”) from October 2008 through January 2014; and Triad Advisors, Inc. (“Triad Advisors”) from January 2014 to December 2014.  While still with Invest Financial, Mr. Sanders switched clearing firms from Pershing to TD Ameritrade in May 2013.  Mr. Sanders was also the owner-operator of two investment advisory firms – Sanders Yearian Advisory Group, Inc. and Leavitt Financial Group, Inc. – and was associated with Capital Asset Advisory Services, LLC.

Record Oil Industry Bankruptcies Take a Toll on Investors

Reuters reports that bankruptcies in the U.S. oil industry have reached record levels.  The number of bankrupt oil and gas companies is 59 and counting, and we are not even half-way through the wave of bankruptcy filings, according to a Reuters article entitled U.S. oil industry bankruptcy wave nears size of telecom bust.  As the article’s title indicates, the number of oil and gas bankruptcies is closing in on the 68 bankruptcy filings by telecom companies during the 2002-2003 telecom bust.

Given in the sustained low interest rate environment, many income-oriented investors have been steered by their investment advisors into oil and gas investments and other alternative or non-conventional investments.  However, non-traded investments like oil and gas limited partnerships are among the most speculative, high-risk investments available.  The category of oil and gas investments is one of the “Top Investor Threats” identified by the North American Securities Administrators Association (“NASAA”), which is the organization of state securities regulators.  They are often sold to investors by brokers and brokerage firms because of the high sales commissions paid to such brokers.

Please call us if you have questions about your oil and gas investments or other investments.  We offer a free initial consultation.  If based on that consultation we feel that further review is needed, we will analyze your situation and provide a recommendation on whether and how to proceed at no charge to you.  Cases are typically handled on a contingent fee basis – i.e., the attorney’s fee is a percentage of any amount we recover on your behalf.

SEC Accuses VGTel Owner and Investment Advisers with Securities Fraud

On December 15, 2015, the Securities and Exchange Commission commenced an action in federal district court in the Southern District of New York against Edward Durante for fraud in the sale of millions of dollars of VGTel stock to numerous of investors.  On January 6, 2016, the SEC filed an Amended Complaint naming Abida Khan, Larry Werbel, Christopher Cervino, Walter Reissman, Kenneth Wise and Evolution Partners Wealth Management, LLC (“Evolution Partners”) as additional defendants.  The activities detailed in the SEC Complaint occurred between 2010 and 2013.  Many of the investors were older investors with conservative risk tolerances.

According to the SEC Complaint, Durante had previously been sentenced to prison for perpetrating a multi-million dollar securities fraud.  Durante purchased VGTel as a shell company.  The SEC alleges that Durante assumed false identities in his dealings with investors (aka Edward Wise, Ted Wise, Efran Eisenberg and Anthony Walsh).  Investors were falsely told that VGTel was a publicly traded company that could rise in value to $50 per share quickly as a result of several major deals.  Unfortunately, VGTel was worthless, and Durante and his associates fraudulently manipulated the market to pump up the price of VGTel stock, according to the SEC Complaint.

Some investors sent their funds to companies controlled by Durante (either Zenith Estates or New Market Enterprises, Inc.).

Larry Werbel owns and operates Defendant Evolution Partners.  Mr. Werbel was associated with LPL Financial LLC from February 2009 to February 2011, and Summit Brokerage Services from March 2011 to April 2014.

Christopher Cervino was associated with Wilson-Davis & Co., Inc. from July 2012 to June 2013, and COR Clearing LLC from August 2013 to October 2014.

Broker dealer firms are required to perform due diligence on investments prior to their being recommended to clients, and are further required to take appropriate steps to supervise the associated persons who are brokers at those firms to ensure compliance with securities laws.  It certainly appears from the SEC Complaint that there were failures of both due diligence and supervision.

Investors who lost money in VGTel should speak with an attorney who is experienced in representing investors in securities fraud cases, and should do so promptly due to time limitations on filing claims.

Florida Invest Adviser Charged with Defrauding Georgia Clients

Fraud is always a danger in the world of investment advisers. In a recent example of this, the Securities and Exchange Commission announced fraud charges against Arthur F. Jacob, age 56, and his firm, Innovative Business Solutions LLC (“IBS”) of Florida.  Jacob is a disbarred attorney and a Certified Public Accountant whose history includes misappropriation of client funds, among other misconduct.  Neither Jacob nor IBS were registered with the SEC or any state as investment advisers, which is often a tell-tale sign of fraud.

According to the SEC, Jacob and IBS had about $18 million belonging to 30 client households, including Georgia residents, under their control from 2009 through July 2014.  The clients signed a “Durable Power of Attorney / Security Account Limited Discretionary Authorization,” which gave Jacob and IBS the ability to buy, sell and trade in the client accounts.  Jacob and IBS received $517,000 in advisory fees for managing the accounts, which included retirement accounts.  The accounts were held at large brokerage firms, which the SEC did not identify in its Order Instituting Administrative Proceedings against Jacob and IBS.

Jacob and IBS allegedly misrepresented and failed to disclose material information about the risks of his investment strategy and certain exchange traded funds (“ETFs”) that were used.  Clients were told that the strategy and the ETFs was low-risk or no-risk when Jacob had reason to know they were not. The SEC also charged that Jacob made false and misleading statements to clients about the profitability of his investment strategies. The ETFs included high-risk products like Proshares Short S&P500 and Proshares Short Russell 2000, which amounted to speculative bets that the S&P 500 and Russell 2000 would decline in value over the short term.  Clients lost nearly 50% of their investment in these products.

An investment adviser’s registration status can be checked for free on the SEC’s website at http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx, as well as FINRA’s Brokercheck at http://brokercheck.finra.org/.

While Jacob and IBS may or may not have the ability to make whole the victims of their fraudulent scheme, the large brokerage firms certainly do.  Those brokerage firms had a duty to supervise Jacob and are legally responsible for any client losses caused by Jacob’s wrongdoing during his association with those firms.

 

SEC Announces Fraud Charges against Investment Manager

On June 29, 2015 the Securities and Exchange Commission announced fraud charges against Wisconsin-based investment advisory firm and owner Mark P. Welhouse of Welhouse and Associates Inc. The firm and owner are being charged with improperly allocating certain options trades that appreciated in value to personal and business accounts, while allocating other trades that depreciated in value to clients.

According to the SEC, the Enforcement Division has engaged in a “data-driven initiative to identify potentially fraudulent trade allocations known as ‘cherry-picking.’” Through this process the SEC Enforcement Division was able to find that Welhouse purchased options in a master account for Welhouse & Associates Inc. and put off allocating the funds into his clients’ accounts until later in the day to determine if the securities would appreciated in value. The SEC claims Welhouse gained about $442,319 in ill-gotten gains allocated to S&P 500 exchange-traded fund. On average, a personal trade made by Welhouse had “a first-day return of 6.28 percent while his clients’ trades in these options had an average first-day loss of 5.05 percent.”

The SEC conducted a statistical analysis to determine if Welhouse’s profits could have been sheer luck or coincidence, but “after running a simulation one million times, the staff concluded it could not.” This process came about because according to Julie M. Riewe, Co-Chief of the SEC Enforcement Division, “Cherry-picking schemes can be extremely difficult to detect without an investor astutely noticing that something may be amiss and coming to us with a complaint about the adviser.”

Consumer Reports: Fraudsters Target the Elderly

In the November 2015 issue of Consumer Reports, light is shed on the fact that roughly 1 in 20 senior adults claim to have been financially abused and why seniors seem to be among the most frequent targets of fraudsters. These perpetrators disguise themselves as government officials such as the FBI or the IRS and claim that the potential victims owe money, they will also offer prizes, sweepstakes, and gifts to give incentive for victims to hand over information such as social security numbers. Some will even use a person’s family as incentive to fork over thousands upon thousands of dollars, such as the case of Beth Baker. Mrs. Baker lost $65,000 in a scheme where she was led to believe her beloved grandson had fallen into legal trouble in Peru and needed her help to release him from prison and pay for legal fees. Baker was instructed not to tell anyone about what was happening and that if she did, terrible things would happen to her grandson and to put the funs on Green Dot MoneyPak cards—these cards are virtually untraceable. Within in the span of five days, Baker lost almost all of her liquid savings.

Fraudsters are able to gain footholds in their senior victims by preying on the elderly’s vulnerabilities such as isolation, loneliness, trusting natures, relative wealth, and in some instances declining mental capabilities. They also use mirroring techniques in order to develop a false bond with their victims and also aid in extracting personal information from their victims. According to Consumer Report the amount of money swindlers have captured is roughly $30 billion annually. Unfortunately only 1 in 44 cases of elderly financial abuse are actually reported. According to the former head of the Manhattan district attorney’s Elder Abuse Unit and current general counsel for EverSafe (a fraud-monitoring service for seniors), “Victims are often deeply ashamed…They worry that if they’re viewed as vulnerable, they’ll lose their independence.” One study that was conducted by the Chicago Health and Aging Project showed that people who fell victim to financial exploitation were hospitalized at a greater rate than people who were not.

Some ways recommended by Consumer Report to avoid falling victim to financial schemes is to sign up for robocall interception services such as Nomorobo, opt out of commercial mail solicitations, have someone trustworthy help you pay your bills, vet all contractors, check financial adviser’s credentials, arrange for limited account oversight, set up an emergency plan and entrust someone to be your power of attorney, visit an elder law attorney. As a loved one visit your elderly often, help set up a limited account, and in extreme circumstances file for guardianship or conservatorship.

NASAA Annual Report Shows Senior are the Most at Risk

On September 22, 2015 the North American Securities Administrators Association released their Annual Enforcement Report. The study was conducted from 49 jurisdictions throughout the United States and showed that twenty-five percent of enforcements actions taken in 2014 occurred where seniors were the victims. According to NASAA President and Washington Securities Director William Beatty, “This number is conservative, in part, because of a reluctance by victims to approach authorities.” Beatty also noted that an average senior-related case involved roughly three senior victims per case and the issues lying in unregistered securities such as promissory notes, private offerings or investment contracts, and the latter of which being the most common among senior abuse cases.

The NASAA report also shows that in 2014 the state securities regulators conducted 4,853 investigations and took 2,042 enforcement actions. Through such actions approximately $405 million dollars in restitution was returned to victims, $174 million in fines against defendants, and prison sentences totaling 1,629 years were given.

Unfortunately unlicensed individuals and firms are the most common among state securities enforcement with a reported 746 enforcement actions. It has also been found that 230 enforcement actions were taken against licensed broker-dealers, 190 actions against investment advisor representatives, 156 against brokerage firms, and 146 against investment adviser firms.

As of 2014, state action withdrew 2,857 securities licenses and denied, revoked, suspended, or conditioned an additional 728 licenses.